Life interest trust when does is vest in the remaindermen?

If we have a life interest trust for h and w just over the half share of the property and we are protecting the property from future remarriage of the surviving spouse care etc there are no overriding powers drafted within the document.
We define the property etc. and say

  1. The h/w has benefit for life and the income
  2. Subject to the life interest of spouse the trust fund is held for Martha and Sandra (the kids) as shall survive me and if more than on in equal shares provided always that if either or both die before me leaving a child or children who reach (age if appropriate) but consider RNRB then they take parents share equally
    This is a common way that is drafted but I am querying The remaindermen so here Martha and Sandra only have to survive the testator to have a vested interest in the trust they don’t have to survive the life tenant? So if for e.g Sandra survives mum and dad is living in the property but then Sandra dies her vested interest in the property of mum and dads then can pass to her chosen beneficiaries in her will or by her intestacy? Only if we have made the gift to Martha and Sandra contingent upon them surviving the life tenant as well rather than just the testator does it then track through the trust?

Is this right or am I misunderstanding?

Lynsey Bashforth
Bashforth Young Solicitor

I agree with that interpretation. If remainderman dies in between death of testator and life tenant, the trust fund vests on death of testator, and on death of life tenant passes to beneficiaries of remainderman’s estate.
As for RNRB, the trust fund is “closely inherited” on death of both parents.

Balkrishna Patel
Stennett & Stennett

You are correct, and it is my preferred method, so that if there is a problem all interests are vested and it can be sorted.

Simon Northcott

If you want the interest to vest only on the death of the second spouse, so you know that the interest passes according to the spouses’ will formats, you will have to require the remaindermen to survive both those spouses (‘provided they are living at the death of the survivor of me and my spouse’) so that the spouses know the interest will pass either to their children or grandchildren – and not, for example, to that ne’er-do-well son-in-law under deceased daughter’s will…

Do not add any age contingencies to the gifts to either the children or grandchildren etc or you will not get the benefit of the RNRB.

Often IPDIs have handy overriding powers to deal, after the second death, with problems such as children dying ‘between’ the spouses. The overriding powers can be used to re-direct the gifts to the grandchildren rather than have the gifts pass into the deceased child’s estate. If however you want to get the benefit of the RNRB, the will cannot have any overriding powers surviving the death of the second spouse. On the second death, the remaindermen must be absolutely entitled to the property the subject of the IPDI.

Jill MacMahon
Thackray Williams LLP

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Thanks for your response Simon. Can I be cheeky and ask for your interpretation on the following clause I am reading this life interest trust to mean that the children need to survive the life tenant but I would be interested in hearing what your thoughts would be on this particular clause if its not to much trouble? It’s the 5.7 clause that I’m reading as it meaning that the kids have to survive the life tenant as well as it says subject to the life interest the children shall take as shall be then living NOT as shal survive me. Would you interpret in this way? I appreciate that it would have been better for it to have been drafted stated on the death of the life tenant

    5.1 In this clause:
    5.1.1 “the life tenant” shall mean my husband …
    5.1.2 “the Property Trustees” shall mean my Trustees for the time being
    5.1.3 “the Trust Period” shall mean the period between my death and the death of the Life Tenant
    5.1.4 “the Trust Fund” shall mean my share of my property …or such other dwelling whether freehold or leasehold as I own or have an interest in at the date of my death as my principal private residence free of any mortgage debt or charge secured thereon
    5.1.5 “interest in possession” shall have the same meaning it has for the purposes of the Inheritance Tax Act 1984 (or any statutory provision which amends or replaces it and which is in force at my death of thereafter)
    5.2 I GIVE the Trust Fund to the Property Trustees to hold on the following trusts
    5.3 The Property Trustees shall pay the income of the Trust Fund to the Life Tenant for the rest of their life
    5.4 The Property Trustees may at any time or times during the Trust Period as to the whole or any part of the Trust Fund in which the Life Tenant has for the time being an interest in possession
    5.4.1 pay out of the proceeds of sale of this property or any substituted property (purchased as a result of this sub clause) to purchase a freehold or leasehold property which will be held for the benefit of the Life Tenant on the same trusts to which this clause refers
    5.5 I declare that in exercising the power conferred upon the Property Trustees in clause 5.4 above the Property Trustees shall be entitled to have regard solely to the interests of the Life Tenant and to disregard all other interests or potential interest under my Will
    5.6 Subject as above the Property Trustees shall permit the Life Tenant to occupy or use rent free any property or assets which or the beneficial interest in which is for the time being comprised in the Trust Fund subject to those conditions for the payment of outgoings insurance repair decoration and other matters as the Property Trustees shall from time to time consider reasonable
    5.7 Subject as above the Property Trustees shall hold the capital and income of the Trust Fund for my children … as shall be then living and if all of them in equal shares or if they are no longer living but leave a child or children who reach the age of twenty-one years such child or children shall take and if more than one in equal shares the share in my property which his her or their parent would have taken if they had survived

Lynsey Bashforth
Bashforth Young Solicitor